Iraq launched the operation in the multi-ethnic region on Sunday as the crisis between Baghdad and the Kurdish Regional Government (KRG) escalated. Tensions have been building since the KRG voted for independence in a Sept. 25 referendum.

International Brent crude futures were at $57.75 per barrel at 0733 GMT, up 58 cents from the previous close, after trading as high as $58.13. U.S. WTI crude was at $51.95 per barrel, up 50 cents. Earlier in the day, it traded as high as $52.22.

"The escalation in Northern Iraq is the main driver," Commerzbank analyst Carsten Fritsch told the Reuters Global Oil Forum. "Oil supply from this region is at risk."

Prices tempered gains as an Iraqi oil ministry official said oil and gas production in Kirkuk was "proceeding normally", and that Kurdish leaders had agreed to avoid fighting in oil and gas facilities.

The conflict heightened worries over oil exports. Kirkuk accounts for 200,000 barrels per day (bpd) of the some 600,000 bpd of oil produced in the KRG region. Turkey has threatened to shut a KRG-operated pipeline that goes to the Turkish port of Ceyhan at Baghdad's request.

Prices were also underpinned by worries over renewed U.S. sanctions against Iran.

U.S. President Donald Trump on Friday refused to certify that Tehran is complying with the accord even though international inspectors say it is.

Under U.S. law, the president must certify every 90 days that Iran is complying with the deal. Congress now has 60 days to decide whether to reimpose economic sanctions on Tehran.

During the previous round of sanctions, roughly 1 million bpd of Iranian oil was cut off. Analysts said that while renewed sanctions were unlikely to curtail that level of exports again, they warned that such a move would be disruptive.

U.S. OIL RIG EXPLOSION

Cuts to U.S. drilling rigs, and an explosion overnight at an oil rig in Louisiana's Lake Pontchartrain, also boosted prices.

Drillers cut five oil rigs in the week to Oct. 13, bringing the total count to 743, the lowest since early June, Baker Hughes energy services firm said late on Friday. <RIG-OL-USA-BHI>

Oil consumption has also been strong, especially in China, where the central bank governor said on Monday that the economy is expected to grow by 7 percent in the second half of this year, defying widespread expectations for a slowdown.